History of OASDI Provisions

Effect of Current Earnings and Taxation of Benefits

Table 2.A29 Earnings (retirement) test for years through 1999, by year enacted

Yearenacted

Effectiveyear

Beneficiariesexempt

Earningssubjectto test

Amount permittedwithout reductionin benefits(exempt amount)

Reduction in monthly benefit a

Annualearnings(dollars)

Monthlywages b(dollars)

For all beneficiaries

1935

. . .

. . .

Covered

. . .

. . .

Full monthly benefit

1939

1940

. . .

. . .

. . .

14.99

. . .

1950

1951

Aged 75 or older

. . .

600 c

50.00

. . .

1952

1953

. . .

. . .

900 c

75.00

. . .

1954

1955

Aged 72 or older

All d

1,200

80.00

One month's full benefit for each $80.00 or fraction thereof

1956

1958

Disabled

. . .

. . .

. . .

. . .

1958

1959

. . .

. . .

. . .

100.00

. . .

1960

1961

. . .

. . .

. . .

. . .

$1 for each $2 of earnings from $1,201–$1,500

$1 for each $1 of earnings above $1,500

1961

1962

. . .

. . .

. . .

. . .

$1 for each $2 of earnings from $1,201–$1,700

$1 for each $1 of earnings above $1,700

1965

1966

. . .

. . .

1,500

125.00

$1 for each $2 of earnings from $1,501–$2,700

$1 for each $1 of earnings above $2,700

1967

1968

. . .

. . .

1,680

140.00

$1 for each $2 of earnings from $1,681–$2,880

$1 for each $1 of earnings above $2,880

1972

1973

. . .

Up to age 72

2,100

175.00

$1 for each $2 of earnings above $2,100

1973

1974

. . .

. . .

2,400

200.00

$1 for each $2 of earnings above $2,400

1975

2,520 e

210.00 e

$1 for each $2 of earnings above $2,520

1976

2,760 e

230.00 e

$1 for each $2 of earnings above $2,760

1977

3,000 e

250.00 e

$1 for each $2 of earnings above $3,000

For beneficiaries who have not reached full retirement age f

1977

1978

. . .

. . .

3,240 e

270.00 e

$1 for each $2 of earnings above $3,240

1979

3,480 e

290.00 e

$1 for each $2 of earnings above $3,480

1980

3,720 e

310.00 e

$1 for each $2 of earnings above $3,720

1981

4,080 e

340.00 e

$1 for each $2 of earnings above $4,080

1982

4,440 e

370.00 e

$1 for each $2 of earnings above $4,440

1983

4,920 e

410.00 e

$1 for each $2 of earnings above $4,920

1984

5,160 e

430.00 e

$1 for each $2 of earnings above $5,160

1985

5,400 e

450.00 e

$1 for each $2 of earnings above $5,400

1986

5,760 e

480.00 e

$1 for each $2 of earnings above $5,760

1987

6,000 e

500.00 e

$1 for each $2 of earnings above $6,000

1988

6,120 e

510.00 e

$1 for each $2 of earnings above $6,120

1989

6,480 e

540.00 e

$1 for each $2 of earnings above $6,480

1990

6,840 e

570.00 e

$1 for each $2 of earnings above $6,840

1991

7,080 e

590.00 e

$1 for each $2 of earnings above $7,080

1992

7,440 e

620.00 e

$1 for each $2 of earnings above $7,440

1993

7,680 e

640.00 e

$1 for each $2 of earnings above $7,680

1994

8,040 e

670.00 e

$1 for each $2 of earnings above $8,040

1995

8,160 e

680.00 e

$1 for each $2 of earnings above $8,160

1996

8,280 e

690.00 e

$1 for each $2 of earnings above $8,280

1997

8,640 e

720.00 e

$1 for each $2 of earnings above $8,640

1998

9,120 e

760.00 e

$1 for each $2 of earnings above $9,120

1999

9,600 e

800.00 e

$1 for each $2 of earnings above $9,600

For beneficiaries who have reached full retirement age f

1977

1978

. . .

. . .

4,000 g

333.33 g

$1 for each $2 of earnings above $4,000

1979

4,500 g

375.00 g

$1 for each $2 of earnings above $4,500

1980

5,000 g

416.66 g

$1 for each $2 of earnings above $5,000

1981

5,500 g

458.33 g

$1 for each $2 of earnings above $5,500

1982

6,000 g

500.00 g

$1 for each $2 of earnings above $6,000

1981

1983

Aged 70 or older

Up to age 70

. . .

. . .

. . .

1983

6,600 e

550.00 e

$1 for each $2 of earnings above $6,600

1984

6,960 e

580.00 e

$1 for each $2 of earnings above $6,960

1985

7,320 e

610.00 e

$1 for each $2 of earnings above $7,320

1986

7,800 e

650.00 e

$1 for each $2 of earnings above $7,800

1987

8,160 e

680.00 e

$1 for each $2 of earnings above $8,160

1988

8,400 e

700.00 e

$1 for each $2 of earnings above $8,400

1989

8,880 e

740.00 e

$1 for each $2 of earnings above $8,880

1983

1990

. . .

. . .

. . .

. . .

$1 for each $3 of earnings above exempt amount

1990

9,360 e

780.00 e

$1 for each $3 of earnings above $9,360

1991

9,720 e

810.00 e

$1 for each $3 of earnings above $9,720

1992

10,200 e

850.00 e

$1 for each $3 of earnings above $10,200

1993

10,560 e

880.00 e

$1 for each $3 of earnings above $10,560

1994

11,160 e

930.00 e

$1 for each $3 of earnings above $11,160

1995

11,280 e

940.00 e

$1 for each $3 of earnings above $11,280

1996

1996

. . .

. . .

12,500

1,041.67 h

$1 for each $3 of earnings above $12,500

1997

13,500

1,125.00

$1 for each $3 of earnings above $13,500

1998

14,500

1,208.33 i

$1 for each $3 of earnings above $14,500

1999

15,500

1,291.67 j

$1 for each $3 of earnings above $15,500

2000

2000

. . .

Earnings test eliminated at full retirement age k

. . .

. . .

. . .

SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2006; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found at the Social Security Program Rules page (http://www.socialsecurity.gov/regulations/index.htm). Social Security Administration, "Cost-of-Living Increase and Other Determinations for 2007," Federal Register, vol. 71, no. 207 (October 26, 2006).

NOTE: . . . = not applicable.

a. Earnings of a retired-worker beneficiary affect total monthly family benefit. Earnings of a dependent or survivor beneficiary affect only his or her benefit. However, effective January 1985, earnings of a retired-worker beneficiary do not affect the benefit to a divorced spouse who has been divorced at least 2 years. Effective for benefits after December 1990, the 2-year requirement is waived if the worker was entitled to benefits before the divorce.

b. Monthly test for self-employment income is defined in terms of substantial services. For taxable years beginning after December 31, 1977, monthly test eliminated for wage and self-employment income except that each individual may use a monthly test for 1 grace year, usually the year of retirement.

c. Applied to self-employment income only.

d. Special provisions for earnings in noncovered employment outside the United States.

e. Became effective because of automatic adjustment provisions mandated by legislation in 1972 and 1973.

f. Full retirement age is 65 for beneficiaries who attain age 62 (age 60 for widow(er)s) before 2000, gradually increasing to age 67 for beneficiaries who attain age 62 in 2022 or later.

g. Discretionary increase included in legislation of 1977.

h. Actual amount is $1,041.66 2/3.

i. Actual amount is $1,208.33 1/3.

j. Actual amount is $1,291.66 2/3.

k. Public Law (P.L.) 106-182, enacted April 7, 2000, eliminated the earnings test beginning with the month a beneficiary reaches full retirement age (FRA). The annual earnings test that applies in the year of attainment of FRA is based on the annual limits established under P.L. 104-121 (including the $1 for $3 withholding rate). In determining annual earnings for purposes of the annual earnings test under this legislation, only earnings before the month of attainment of FRA will be considered. Public Law 106-182 did not change the annual exempt amount for beneficiaries who are under FRA throughout the year, which continues to be pegged to increases in the average wage.

Table 2.A29.1 Earnings (retirement) test for 2000–2007, by year enacted

Yearenacted

Effectiveyear

Beneficiariesexempt

Earningssubjectto test

Amount permittedwithout reductionin benefits(exempt amount)

Reduction in monthly benefit a

Annualearnings b(dollars)

Monthlywages c(dollars)

For beneficiaries who have reached full retirement age d

2000

2000

. . .

The earnings test no longer applies effective with the month of attainment of full retirement age.

. . .

. . .

. . .

For beneficiaries who will not reach full retirement age during year d

2000

2000

. . .

. . .

10,080

840

$1 for each $2 of earnings above $10,080

2001

10,680

890

$1 for each $2 of earnings above $10,680

2002

11,280

940

$1 for each $2 of earnings above $11,280

2003

11,520

960

$1 for each $2 of earnings above $11,520

2004

11,640

970

$1 for each $2 of earnings above $11,640

2005

12,000

1,000

$1 for each $2 of earnings above $12,000

2006

12,480

1,040

$1 for each $2 of earnings above $12,480

2007

12,960

1,080.00

$1 for each $2 of earnings above $12,960

For beneficiaries who will reach full retirement age during year d

2000

2000

. . .

. . .

17,000

1,416.67 e

$1 for each $3 of earnings above $17,000

2001

25,000

2,083.33 f

$1 for each $3 of earnings above $25,000

2002

30,000

2,500.00

$1 for each $3 of earnings above $30,000

2003

30,720

2,560.00

$1 for each $3 of earnings above $30,720

2004

31,080

2,590.00

$1 for each $3 of earnings above $31,080

2005

31,800

2,650.00

$1 for each $3 of earnings above $31,800

2006

33,240

2,770.00

$1 for each $3 of earnings above $33,240

2007

34,440

2,870.00

$1 for each $3 of earnings above $34,440

SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2006; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found at the Social Security Program Rules page (http://www.socialsecurity.gov/regulations/index.htm). Social Security Administration, "Cost-of-Living Increase and Other Determinations for 2007," Federal Register, vol. 71, no. 207 (October 26, 2006).

NOTES: Public Law (P.L.) 106-182, enacted April 7, 2000, eliminated the earnings test beginning with the month a beneficiary reaches full retirement age (FRA). The annual earnings test that applies in the year of attainment of FRA is based on the annual limits established under P.L.104-121 (including the $1 for $3 withholding rate). In determining annual earnings for purposes of the annual earnings test under this legislation, only earnings before the month of attainment of FRA will be considered. Public Law 106-182 did not change the annual exempt amount for beneficiaries who are under FRA throughout the year, which continues to be pegged to increases in the average wage.

. . . = not applicable.

a. Earnings of a retired-worker beneficiary affect total monthly family benefit. Earnings of a dependent or survivor beneficiary affect only his or her benefit. However, earnings of a retired-worker beneficiary do not affect the benefit to a divorced spouse who has been divorced at least 2 years. The 2-year requirement is waived if the worker was entitled to benefits before the divorce.

b. Automatic adjustment provisions and legislative history of the earnings test are in Table 2.A18.

c. Monthly test for self-employment income is defined in terms of substantial services. Each individual may use a monthly test for 1 grace year, usually the year of retirement.

d. Full retirement age is 65 for beneficiaries who attain age 62 (age 60 for widow(er)s) before 2000, gradually increasing to age 67 for beneficiaries who attain age 62 in 2022 or later. See Table 2.A17.1 for the FRA by year of birth.

SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2006; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found on the Social Security Program Rules page. Social Security Administration, "Cost-of-Living Increase and Other Determinations for 2007," Federal Register , vol. 71, no. 207 (October 26, 2006).

NOTES: Earnings are net of any wage subsidies and impairment-related expenses.

The guidelines for substantial gainful activity (SGA) for self-employed individuals differ from the guidelines for wage earners.

Self-employment activity is generally examined in terms of time spent and degree of effort, as compared with that of nondisabled self-employed individuals.

. . . = not applicable.

a. Earnings above the maximum amount ordinarily demonstrate SGA; earnings below the minimum amount show that SGA has not occurred. When earnings are between the minimum and maximum, other factors are considered.

b. The amendments in 1977 provided that, effective 1978, earnings of blind beneficiaries would be evaluated under different SGA guidelines than are nonblind beneficiaries.

c. Guidelines pre-1978 are the same as those applicable to nonbind beneficiaries.

d. Annual amounts were determined by automatic adjustments linked to increases in average wage level. The amounts equal the monthly exempt amounts under the earnings test applicable to beneficiaries who have reached full retirement age (see Table 2.A29 for the amounts for 1983–1995).

Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income over $32,000

Ending after December 31, 1983

1993

32,000 but not 44,000

Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income over $32,000

Beginning after December 31, 1993

44,000

Lesser of 85 percent of Social Security and Tier 1 Railroad Retirement benefits or the sum of $6,000 plus 85 percent of income over $44,000

Beginning after December 31, 1993

Married filing separate returns a

1983

0

Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income

Ending after December 31, 1983

1993

0

Lesser of 85 percent of Social Security and Tier 1 Railroad Retirement benefits or 85 percent of income

Beginning after December 31, 1993

Individuals in all other filing categories

1983

25,000

Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income over $25,000

Ending after December 31, 1983

1993

25,000 but not 34,000

Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income over $25,000

Beginning after December 31, 1993

34,000

Lesser of 85 percent of Social Security and Tier 1 Railroad Retirement benefits or the sum of $4,500 plus 85 percent of income over $34,000

Beginning after December 31, 1993

SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2006; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found on the Social Security Program Rules page. Taxation of Social Security benefits is governed by the Internal Revenue Service Code. IRS describes the rules governing taxation of Social Security benefits in IRS publication 915.

NOTES: Income is defined as modified adjusted gross income, plus 50 percent of Social Security and Tier 1 Railroad Retirement benefits. Modified adjusted gross income is adjusted gross income (before Social Security or Railroad Retirement benefits are considered), plus tax-exempt interest income, with further modification of adjusted gross income in some cases involving certain tax provisions of limited applicability among the beneficiary population.

Social Security and Tier 1 Railroad Retirement benefits include workers' compensation benefits to the extent they cause a reduction in Social Security or Tier 1 Railroad Retirement disability benefits.

a. Includes only married taxpayers filing separately who lived with their spouse at any time during the tax year; married individuals filing separately who did not live with their spouse are treated the same as unmarried individuals.

SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2006; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found on the Social Security Program Rules page. Taxation of Social Security benefits is governed by the Internal Revenue Service Code. IRS describes the rules governing taxation of Social Security benefits in IRS publication 915.

NOTE: . . . = not applicable.

a. Adjusted gross income (before Social Security or Railroad Retirement benefits are considered), plus tax-exempt interest income, with further modification of adjusted gross income in some cases involving certain tax provisions of limited applicability among the beneficiary population.

b. Social Security and Tier 1 Railroad Retirement benefits, including workers' compensation benefits to the extent they cause a reduction in either of these two types of benefits.

c. For married couples filing joint returns, up to 50 percent of benefits are subject to income tax if gross income is over $32,000 but less than $44,000. If gross income is less than $32,000, none of the Social Security benefits will be taxable. If gross income exceeds $44,000, up to 85 percent of Social Security benefits will be taxable income. Similar lower and upper level thresholds or "base amounts" for single individuals are $25,000 and $34,000. There is no similar threshold or base amount for married individuals who live together but file separate returns (for example, up to 85 percent of Social Security benefits in those cases may be considered taxable income).

d. Includes only married taxpayers filing separately who lived with their spouse at any time during the tax year; married individuals filing separately who did not live with their spouse are treated the same as unmarried individuals.